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UK - House prices surge to strongest growth levels in four years

The latest data and analysis from Halifax this morning has revealed that average house price growth has continued to beat expectations with prices in September 7.3% higher than in the same month a year earlier – the strongest growth since June 2016.

According to monthly figures, house prices in September were 1.6% higher than in August, and during the latest quarter, 3.3% higher than in the preceding three months.

Russell Galley, Managing Director, Halifax, comments on this morning's figures:

“The average UK house price is now approaching £250,000 after September saw a third consecutive month of substantial gains. The annual rate of change will naturally draw attention, with an increase of 7.3% the strongest since mid-2016. Context is important with the annual comparison, however, as September 2019 saw political uncertainty weigh on the market.

“Few would dispute that the performance of the housing market has been extremely strong since lockdown restrictions began to ease in May. Across the last three months, we have received more mortgage applications from both first-time buyers and home movers than at any time since 2008. There has been a fundamental shift in demand from buyers brought about by the structural effects of increased home working and a desire for more space, while the stamp duty holiday is incentivising vendors and buyers to close deals at pace before the break ends next March.

“It is highly unlikely that the housing market will continue to remain immune to the economic impact of the pandemic. The release of pent up demand and indeed the stamp duty holiday can only be temporary fillips and their impact will inevitably start to wane. And as employment support measures are gradually scaled back beyond the end of October, the spectre of increased unemployment over the winter will come into sharper relief.

“Therefore while it may come later than initially anticipated, we continue to believe that significant downward pressure on house prices should be expected at some point in the months ahead as the realities of an economic recession are felt ever more keenly.”

Anna Clare Harper, CEO of asset manager SPI Capital and author of Strategic Property Investing, says: "Annual house price growth of 7.3 per cent reflects the release of pent-up demand and supply and the impact of the temporary stamp duty holiday.

"This figure does not apply to all geographies and all properties, but simplistically it represents a stark contrast with ‘returns’ available elsewhere. For example, NS&I recently cut its popular direct saver account rate to 0.15 per cent. It’s no surprise that many prefer to keep their money in property. People prefer to put money somewhere they feel is safe, in uncertain times. 

"So what next? Some in the real estate industry feel this ‘mini-boom’ will be short-lived, given economic circumstances and forecasts. However, the ‘fundamental’ drivers of housing demand are strong: we are in an environment of low-interest rates, with reduced rates of new buildings coming onto the market and limited existing stock. 

"For investors, the important thing to remember is that capital growth is a great bonus, but shouldn’t be relied on. This is important when lending is cheap since debt still needs to be repaid."

Jamie Johnson, CEO, FJP Investment, said:

“Make no mistake about it – the property market is alive with activity. Buyers are flocking to real estate, and this is resulting in record levels of house price growth. Clearly, the stamp duty holiday is working and working well.

“Of course, the concern is whether the recent spike in COVID-19 cases will dampen buyer demand. While I’m sure it will have some impact, I do believe that sales will continue so long as the stamp duty holiday in place. After all, a recent survey of homebuyers by FJP Investment revealed that 43% of those aged between 18 and 34 said they were keen on taking advantage of this tax break.

“The chancellor will no doubt be looking at the latest round of house price indices for September with keen interest. Given the government’s desire to promote investment and consumer spending, this surge in price growth and activity might compel the chancellor to either extend the stamp duty holiday or introduce additional financial incentives to support sellers and buyers.

"FJP Investment recently revealed that 43% of homebuyers and homeowners are in favour of more financial incentives for property buyers, so the government would do well to implement such measures before the end of the end of the SDLT holiday on March 31st, 2021.”



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